WASHINGTON — The 11 Democrats on the Senate Banking Committee and the top Democrat on the House Financial Services Committee are calling on Republicans to hold hearings with Wells Fargo's top executives over the bank's phony-accounts scandal and allegations that it improperly took out force-placed auto insurance on 570,000 borrowers.
In a press release late Tuesday, Sherrod Brown, Elizabeth Warren, Mark Warner and the other eight Democrats on the panel said they would like an update on "significant developments" since regulators took action against Wells when employees opened up millions of fake accounts in order to meet sales quotas. Democrats cited reports that more customers were affected than previously disclosed, that the bank signed up customers for insurance products without authorization and that Wells retaliated against employees.
"Many Committee members have sought additional information from Wells Fargo about these developments, with varying degrees of success," Democrats wrote in a letter to Senate Banking Committee Chairman Mike Crapo, R-Idaho. "A hearing would give members the opportunity to hear directly from the bank's top leadership about these developments."
Democrats tied the Wells' scandal to the Consumer Financial Protection Bureau's rule to ban mandatory arbitration clauses, a regulation that Republicans are trying to repeal.
"Wells Fargo used forced arbitration clauses in the contracts for legitimate customer accounts to prevent customers from suing in court for damages arising from the creation of fake accounts," the Democrats wrote. "A hearing with [Wells CEO Tim] Sloan and [Chairman Mike] Sanger would allow members to obtain more information about whether this use of forced arbitration clauses has in fact benefited consumers or not."
Observers have said the latest Wells' revelations, in which an internal investigation found that the bank's practices led to roughly 20,000 cars being unlawfully repossessed, will make it harder for Republicans to muster the necessary 50 votes to repeal the CFPB rule under the Congressional Review Act.
Meawhile, Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, is calling for a hearing on the force-placed insurance scandal, also asking for Sloan and Sanger to testify.
Waters listed five other egregious practices by Wells as the reasons to hold another hearing.
"In addition to this illicit conduct by the bank, there have been seemingly never-ending developments about additional customers who have been harmed in a number of ways by the bank that clearly warrant committee scrutiny," Waters wrote in the three-page letter, which was signed by Rep. Dan Kildee, D-Mich., and Rep. Al Green, D-Tex.
In the past year, journalists have reported that Wells enrolled customers in Prudential life insurance policies without their consent; modified mortgages without authorization to possibly collect government subsidies; delayed mortgage closing dates until after the expiration of interest rate locks to levy additional fees on customers; and provided branches with advance notice of inspections that allowed employees to destroy documents containing evidence of wrongdoing. The bank also shared personal and financial information on thousands of its customers with an outside party, an issue that House Financial Services Committee Chairman Jeb Hensarling, R-Tex., raised in a letter to Sloan.
Waters, too, tied the issue to the CFPB arbitration rule, noting that the bank invoked arbitration clauses to prevent consumers who had phony accounts opened without their authorization from suing.
"It was appalling to see reports that Wells Fargo went to court to enforce the forced pre-dispute arbitration clauses for customers who had fake accounts set up in their name to prevent them from seeking the redress they deserve through our judicial system," Waters wrote. "The bank should explain to the committee the logic of this decision in light of the fact that the bank’s customers did not ask them to open these accounts in the first place."
The arbitration rule, which goes into effect in March, would allow consumers to band together to sue financial firms rather than force them to arbitrate behind closed doors.
"The committee’s responsibility should be focused on the public’s interest and not on shielding the nation’s biggest banks from scrutiny when they break the law," Waters wrote.